Auditing and Audit Firms in Germany before 1931

Considerable differences exist between Germany and AngloAmerican countries in the development of the statutory audit, the emergence of professional associations of auditors, and the legal and organizational forms of audit firms. This paper examines historical developments in Germany from the late 19th century, to the formal regulation of auditing and the audit profession in 1931. Its main objective is to provide a better understanding of the comparatively slow development of the audit in Germany and reveal attitudes towards the audit and the forms of audit firms. A secondary objective is to examine the use of agency theory frameworks for this type of historical research. The study draws on primary and secondary sources, both of which have been underutilized by previous authors. The paper finds that many of the unique features of the development of auditing in Germany and the solutions adopted there can be traced to historical differences concerning the objectives of the audit, the structure of the audit market and the foundations of the audit profession. It further adds to the critique of agency theory assumptions in historical contexts.